Moratorium extended till August

On March 27, the central bank had permitted all commercial banks and other institutions like NBFCs and housing finance companies to allow a moratorium of three months on payment of instalments on all term loans as on March 1, 2020. (Shutterstock)

In a huge relief to borrowers, the RBI has extended the loan moratorium by another three months to August 31. The central bank also came up with a slew of other measures to soften the blow of Covid-19 on businesses.

It allowed the deferment of interest on working capital and permitted lending institutions to convert the accumulated interest on working capital over the deferment period (up to August 31, 2020) into a “funded interest term loan”.

This amount can now be repaid before the end of the fiscal year instead of the earlier rule which said it had to be done in one shot after the deferment period is over.

On March 27, the central bank had permitted all commercial banks and other institutions like NBFCs and housing finance companies to allow a moratorium of three months on payment of instalments on all term loans as on March 1, 2020.

RBI governor Shaktikanta Das on Friday said that in view of the extension of the lockdown and continuing disruptions due to Covid-19, lending institutions can now extend the moratorium by another three months — from June 1 to August 31, 2020.

Therefore, the repayment schedule and all subsequent due dates, and also the tenor for such loans, can now be shifted across the board by another three months.

Bankers have said that since the March announcement, 20-30 per cent of their customers by value have opted for the moratorium.

As applicable earlier, if a bank customer takes the moratorium, it will not be treated as default or an asset classification downgrade.

Stressed assets

In yet another relaxation, the RBI said that the moratorium period will also be excluded from current rules which say that banks must make a provision of 20 per cent if a resolution plan for a stressed account is not in place by 210 days from the date of default.

The RBI also raised the group exposure limit of banks to 30 per cent of their capital base from the previous level of 25 per cent. This came as several corporates have been finding it difficult to raise funds from debt markets and other capital market segments.